Senate Approves Extension To TARP Warrants

The Senate
just approved an amendment to broader legislation that is
expected to pass later today that would remove the requirement
that the government sell warrants within 10 days after a bank
withdraws from TARP.

The warrants were granted in connection with the original TARP
funds. The program required the Treasury to liquidate the
warrants within 10 days by selling them back to the bank or to a
third party. Some banks had lobbied that Congress should
extinguish the warrants, hoping to avoid the cost of buying them
back from the government.

This seems a good compromise. Instead of extinguishing the
warrants, they can now simply be held until they are worth more.
Many of the warrants are currently underwater, and would be
worthless if exercised today.